Lottery could get face-lift in sale

Published 6:30 am, Saturday, February 17, 2007

AUSTIN — The Texas Lottery might look quite different under a private operator if the state opens the door to online games, casino-style Keno and video slot machines as suggested by financial firms that have consulted with Gov. Rick Perry's office.

Documents prepared by three firms seeking to manage the deal for the state say the sale price would range from $14 billion to $28 billion, depending on the buyers' ability to increase profits by expanding gaming in Texas.

That may mean legalizing video slots or letting people buy tickets at home on their digital televisions, according to the documents reviewed by the Associated Press.

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Addiction worries

Those ideas worry gambling foes, who say poor Texans will be sucked into addictive games that are almost identical to those in casinos.

"We have a lottery. Leave it at that," said Dawn Nettles of Garland, a lottery watchdog who supports the proposed sale but opposes expansion of gaming.

Perry spokesman Robert Black said the governor is not advocating the expansion of gambling and simply wants the state to get "the most bang for our buck."

"This is not unlike trying to sell your house," he said.

The deal and some new types of games would have to go through the Legislature, which has been reluctant to allow new gaming in recent years.

At first, Black said Friday that introducing some new games that aren't currently legal, such as Keno and video slots, would require a constitutional amendment, and the lottery sale most likely would, too. He said the governor's office thinks the best approach would be through a constitutional amendment.

But later he said "it's unclear" and that an attorney general's opinion may be needed to decide whether those questions would have to go before voters.

Amendments must be approved by two-thirds of the House and Senate and a majority of Texas voters.

Legislative leaders have been noncommittal about selling the lottery and have said they are looking at whether the transaction could ensure the state gets the $1 billion per year the lottery currently generates for public education.

The lottery reported more than $3.77 billion in sales in the 2006 fiscal year, the biggest total in 14 years.

Financial input

In the past few weeks and months, Perry's office received financial advice on the lottery from
UBS Investment Bank
,
Morgan Stanley
and Goldman Sachs. The companies analyzed ways to make money off the lottery through a sale, partial sale, lease or other arrangement.

Perry wants to use the proceeds to form multibillion-dollar endowments to pay for public schools, fund cancer research and help people buy health insurance.

The firms' proposals include a variety of profit-boosting ideas meant to maximize the sales price, from adding retail locations to letting people use lottery terminals to pay bills or fines.

They also suggest expanding advertising and tweaking payouts to maximize lottery proceeds.

Nettles said she thinks the private owner would let more people win sizable jackpots so more people would want to play.

"The (state) has done just the opposite," she said. "They've created losers. They just keep making it harder to win and what they're doing is turning people off."

Black said there's been no discussion between the governor's office and any of the potential lottery buyers.